Osteoarthritis (OA) is a degenerative disease of articular cartilage affecting millions of people worldwide, including over 70% of people over 65. When articular cartilage is damaged, it has inadequate intrinsic ability to repair itself due to it low cellularity and avascular nature. Current techniques do not typically restore total function, and thus an alternative therapy is needed. Tissue engineering of cartilage tissue has great potential as a viable technology to meet this need. Human mesenchymal stem cells (hMSCs) from bone marrow are a promising, clinically relevant cell source for these cartilage tissue engineering strategies. Two important factors for the in vitro chondrogenic induction of hMSCs are high initial cell density and exposure to transforming growth factor- (TGF-). We have engineered a system of self-assembling hMSC sheets incorporated with growth factor releasing hydrogel microspheres. Gelatin is used as the base biomaterial for the microspheres, as it forms biocompatible, biodegradable hydrogels that can facilitate the controlled delivery of TGF-1 over time in the presence of cell-secreted proteases while preserving bioactivity of the growth factor. This system of self-assembled, microsphere-incorporated hMSC sheets is capable of forming cartilage in the presence of exogenous TGF-1 or with TGF-1 released from the incorporated microspheres. The incorporation of TGF-1 loaded microspheres could eliminate the need for exogenous growth factor supplementation, overcome transport limitations of exogenous supplementation, decrease culture time necessary prior to implantation of neocartilage constructs, and circumvent the problem of los of the chondrogenic phenotype in vivo by providing prolonged local exposure of hMSCs to chondrogenic growth factor. In addition, dynamic compression and perfusion of tissue engineered cartilage sheets have been shown to improve the mechanical properties and increase extracellular matrix synthesis of resulting tissue. Our central hypothesis is that the chondrogenic potential of these hMSC-microsphere sheets can be regulated by controlling growth factor presentation to the cells in the presence or absence of mechanical loading and perfusion. The Specific Aims are: (1) Determine the role of spatial and temporal presentation of chondrogenic factors and cell number on hMSC sheet chondrogenesis; (2) Determine the effects of dynamic compressive mechanical loading and perfusion, separately and in combination, of the hMSC sheet system on cartilage matrix composition and organization and resulting construct mechanical properties; and (3) Examine the capacity of this hMSC sheet system to repair articular cartilage in a full-thickness critical-sized cartilage defect in a rabbit model. The successful completion of the proposed work will provide the basis for a clinically relevant tissue engineering strategy for the repair of damaged articular cartilage.